Why aged care is at the centre of Australia’s hospital funding fight
State Premiers will meet with the Prime Minister Anthony Albanese in Sydney on Friday (30 January) in a bid to finalise the National Health Reform Agreement, which determines Federal funding of State-run hospitals.
The Governments had hoped to make a deal before Christmas, but the December 2025 Bondi Beach shooting during a celebration of the Jewish holiday of Hanukkah, stalled negotiations.
In a meeting on 20 December 2025, State Premiers and Health Ministers rejected the Federal Government’s latest offer, claiming the current offer on the table does not sufficiently cover costs.
The States had joined forces last year, commissioning research showing the high number of long-stay patients in hospitals waiting on Federally funded residential aged care is ballooning costs, and demanded increased Commonwealth funding.
Data collected by The Weekly SOURCE shows there are nearly 2,800 patients stuck in hospital waiting for a place in residential aged care.
An interim agreement reached in early 2025, which runs from 1 July 2025 until 30 June 2026, provides approximately $32.2 billion plus an additional $1.7 billion one-off payment.
However, the States say an extra $8 billion-$10 billion is needed.
Ahead of this week’s meeting, Federal Health Minister Mark Butler said Governments had been “stuck in trench warfare playing the blame game on hospital funding [for] too long.
“This infuriates Australians.
“The Commonwealth has put a very generous offer on the table to secure hospital funding, the future of the NDIS and keep older Australians out of hospital,” he said.
Time is running out
In 2023, the State and Federal Governments agreed to gradually lift the Commonwealth’s contribution share to 42.5% by 2030 and 45% by 2035. The current Contribution Rate is 37.6%, the lowest since 2015-16, according to NSW Budget Papers.
Time is running out for the States and Federal Government to come to an agreement, with South Australia heading to the polls on 21 March 2026 and the State Government going into caretaker mode on 21 February.
“If we haven’t struck a deal by then, it becomes very difficult to put in place new hospital funding arrangements before 1 July,” Butler said.
Australia-wide, aged care beds are close to capacity. Government forecasts put future additional need at 9,000 new beds every year for the next decade, yet only 800 new aged care beds were built last year. The cost pressure on hospitals is not likely to ease any time soon.
Watch this space in the weeks ahead as we cover the negotiations.
